Ottawa Property Market — Losing Momentum — Sep 2023
The Ottawa property market shows signs of cooling as we move into September, with prices declining and sales volumes slowing down.
The benchmark house price dropped in July; on September 15th, when the August benchmark price is released, it is likely to be even lower. The average house price fell dramatically in August, signalling that high-end homes are not selling well. As sellers of higher-priced homes are forced to drop their asking prices, they will put downward pressure on all home values.
Ottawa house purchase-sales activity peaked in May this year when the more active Spring market typically continues into June and July. As a result, listings are sitting on the market longer, and at the current rate of purchases, it would take roughly three months to clear out all the active listings. Last Spring, the clearance rate was approximately one month.
Ottawa condo apartment median prices have also fallen for two consecutive months. Purchase and inventory conditions are similar to those for houses.
Why are there so few home purchases in Ottawa?
There are several factors contributing to the cooling of the Ottawa property market.
Mortgage Rates: Rising interest rates are making it more expensive to borrow money, which is reducing buyer demand.
Increasing Inventory: Another factor contributing to the cooling market is the accumulating number of homes for sale. While three months of supply is not high, it is the highest the market has seen since 2019. This supply increase gives buyers more options and reduces the heat in bidding wars.
Faltering Consumer Sentiment: Consumer sentiment tends to reinforce existing trends. It’s like an amplifier. While confidence in real estate was rising in the first half of 2023, it has now stalled. If a sustained downward price trend emerges, confidence is likely to tumble. Byers with low confidence in price appreciation often delay their purchases and compound the weakness in the market.
Reports earlier in 2023 were hopeful for a recovery after the double-digit price drops in 2022. However, the recent trends suggest that the market is cooling down again. Home sellers in Ottawa-Gatineau should be prepared to negotiate.
Here are some other things to keep in mind about the Ottawa property market:
The market cooling down is broad, impacting all property types. Speculative investment appears to have shifted from Ontario to Calgary.
The rental market is still strong, with rents continuing to rise. This could be cyclical — due to potential first-time homebuyers delaying their exit from the rental market. When mortgage rates fall, and buyers re-enter the market, rents could fall sometime in late 2024 or 2025.
The government is taking steps to cool down the housing market, such as introducing a foreign buyers' ban.
Overall, the Ottawa property market is showing signs of cooling down. However, it is still a seller's market, and buyers should be prepared to face competitive conditions.
